Sunday, December 6, 2020

Why Dividend Growth Investing?

I'm happy to say I've been a Dividend Growth Investor for over 7 years now but it's become so much like second nature that to be honest I forget to even talk about it on this blog or even with anyone else I meet. Just because I don't talk about it though doesn't make it any less my favorite way to invest even to this day.

Fact is it isn't DGI's problem, it's a me problem...

Whenever anyone talks about any money topic recently I tend to cringe and not want get drawn in.

The main problem is that in my eyes the world seems to have become so money, power, corruption, greed obsessed that us everyday folks have become more and more insignificant to what seems like an increasingly bought off machine. Call it paranoia, cynicism or both but I just don't like to think about any part of the negative connotations that come with money. It sadly does make the world go round and these days especially it feels like money says jump and everyone asks how high?

Even writing this is quite uncomfortable. Weird huh? It's not even like by talking about it implies I'm automatically gonna run off and buy off a politician or a media company.

Does this mean that I'm meant to give everything away Ram Dass style and just live to serve other humans? After all isn't money simply a man-made social conscript that has seemingly created most of the negatives that ail the modern world, would we all treat each other better and be a lot more mentally healthy without it?

Maybe Ram's decision was a little extreme, I believe a balanced life can be a combination of both, take care of your basic financial needs per Maslow's pyramid and then go help others as and where you can in whatever way shape or form that takes.

But this blog is called Diversifieddividends4life, so technically isn't my job writing here meant to be all about investing? In it's defense I like to believe this blog is helping people stop being modern day slaves since unions are no longer around to protect us.

I just sometimes ponder that we're all on the wrong path with priorities upside-down doing things mother nature never intended. Lawless, godless and wild with money being the perpetrator.

Apologies for the rant, as usual, I digress....

Dividend Growth Investing is simply investing for growing dividends. As in growing dividends for the rest of your time in existence on this earth. 

Other investing strategies just didn't quite make as much sense to me all those years ago, the whole saving up a couple of million, dealing with crap from my boss etc couldn't wait that long. I was already burnt out and growing more and more frustrated and stressed by the day.

Can you imagine it though? My Manager in Big Corporation gives me relentless pressure, put-downs, beat-downs and my only response is "you'll be sooo sorry you said that in...err....6...(counts on fingers)..maybe 7...hmm...hang on 8 years time!!"

"Yeah in 8 years time, if you're still working here...I'll bring you back to this day and hand you my notice...you'll be soooo sorry when I reach a million, maybe 2 million dollars.....stock market permitting obviously"

Conventional investing wisdom was never honestly going to work, I couldn't stay there another decade to make some arbitrary million and then spend it down until an estimated date of demise in retirement based on historic family longevity. 

I mean what if I live to be over 90 and I've spent it all in the old folks home? What the heck do I think I'm going to do then?

"Ok here's your pudding but take your medication first.."

"Nope, gotta head back to work, I'm outta cash"

As I shuffle off the commode and pop the teeth in to go work on my resume...

Harsh example but you see what I mean though? A successful DGI strategy should always see your portfolio worth considerably more than the first day you retired. Throwing off ever-growing dividends along the way over and above inflation. It should be at it's highest value when you are at your most vulnerable, when you are likely to experiencing your most trying medical issues.

The onus should be on trying to live longer and happier, not praying for an early demise because funds are dwindling fast, or begging DD4L Jr for a bailout.

So in my case the portfolio value at age 90 should be considerably more than when I first retired at age 45, long after retiring when a comfortable level of growing income is reached.

That's it. Right there. You get to tell the employer you don't need them anymore when your life is covered financially. I tried to stay longer, honestly but found it impossible/unbearable, even that last OM6months. 

On the way to FIRE the same strategy was followed, growing dividends getting reinvested along with regular contributions, bonuses etc into the portfolio, growth-on-growth like a snowball rolling down a hill getting ever-compacted until it becomes an avalanche (in a positive way)

Keep that snowball rollin'....

As you go along it's pretty cool to actually line up each utility bill, be it electric, gas, water, groceries and allocate a growing dividend to each one.

Have a party pretty much every time a bill is covered, announcing to the world you won't be paying an electricity bill ever again...well, using sweat of the brow money anyways.

When each bill has a dividend allocated which covers the worst case scenario you're good. Test the portfolio while you still work. Ignore your regular wage and live off it's dividends alone for a year. maybe two to test if it works for you. Throw your highest bills at it, the hottest summers your aircon can handle, children that take showers twice a day.

Then when you have enough confidence from all the testing you're Financially Independent. Retired if you want. Done.

A million dollars? Two million? Safe withdrawal rate? Nope, it's just about covering the bills. I always worked to the concept that it's all that's necessary. That and ensuring the dividends continue to grow into perpetuity with a healthy back up fund for emergencies (new roof, deductibles etc) and for any buying opportunities. Withdrawal of principal should never even enter your mind for the decades to come, passing the fully matured portfolio onto your offspring eventually.

High quality companies that have grown dividends for decades through recessions, booms, busts, low dividend payout ratio's, low debt and ideally a sturdy, long term product that everyone can't live without. Like utilities, food, toothpaste, chemicals, home improvement etc

Alongside this though I did work on building home equity by buying properties in need of modernization, working on them and selling them before one final property downsize to become mortgage free. Not needing a dividend to cover a mortgage or rent payment makes life so much simpler.

So in a nutshell this is the premise of the blog, DGI as the strategy to get you over the FIRE finish line the soonest and then growing from there all the way into your senior years.

Obviously there are many other different ways to invest but DGI has always been the strategy that seemed to make the most sense long term, making it possible to quit thinking about money all the time and get on with living as soon in life as possible.

After all there's only so much money one person needs, any more won't make you any happier so why bother pursuing it beyond meeting your basic needs. Isn't it just wasting your life to keep pursuing more money than you can ever spend? Or to just keep going in order to buy more stuff? Society tries to dictate when the average human should do this, buy that, retire, no reason to really listen though since we're not at school anymore.

Here are just some DGI company examples who recently upped their dividends....evidently didn't get the Covid fear email. Not advising anyone to run out and buy them all, just making a point that even through the worst recession dividends can still grow, do your research and build your own confidence levels:-

Agilent Technologies (A), Aarons Holdings Company (AAN), Aflac (AFL) Automatic Data Processing (ADP), Air Lease Corporation (AL) Becton, Dickinson and Company (BDX), Cullen/Frost Bankers (CFR), Emerson Electric (EMR), First American Financial (FAF), McCormick and Company (MKC), Merck & Co, (MRK) Roper (ROP), Southside Bancshares (SBSI), South Jersey Industries (SJI) , Spire (SR) Tyson Foods (TSN), Visa (V) and The York Water Company (YORW) to name but a tiny few...

As is always the case though each investor should research and follow an investing strategy that is right for them and they are comfortable with, performing their own due diligence or employing a financial adviser if in any doubt. 

Long : ADP, AFL, BDX, MKC, MRK and SR,

Love to all,

DD4L

 



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